The Ministry of Finance is working on a draft law that envisages a significant revision of the simplified taxation system for individual entrepreneurs. Possible changes include new single tax rates for group 3, restrictions for group 2, and mandatory VAT registration for some entrepreneurs.
The Ministry of Finance is working on a draft law that envisages a significant revision of the simplified taxation system for individual entrepreneurs. Possible changes include new single tax rates for group 3, restrictions for group 2, and mandatory VAT registration for some entrepreneurs.
This was announced by People’s Deputy Halyna Vasylchenko, publishing the Ministry of Finance’s response to her appeal regarding the upcoming reform.
According to her, the ministry confirmed that it is working on a relevant draft law. The document has not yet been submitted to the Verkhovna Rada, and the specific parameters of the proposed changes may still change.
One of the proposals is to review the list of activities that can operate under Group 2 of the single tax. Some activities are planned to be excluded from it and transferred to Group 3.
For the 3rd group itself, the Ministry of Finance is considering differentiated single tax rates depending on the type of activity. For entrepreneurs who provide services, the rate may reach 10%.
Currently, individual entrepreneurs of the 3rd group without VAT pay 5% of the single income tax, as well as 1% of the military levy. That is, for some entrepreneurs, the proposed single tax rate may actually mean doubling this payment.
Another change concerns VAT. The Ministry of Finance proposes to make VAT registration mandatory from January 1, 2028 for entrepreneurs on the simplified system who exceed a certain income threshold.
According to the information Vasylchenko received, this threshold cannot be higher than €85,000.
At the same time, the Ministry of Finance proposes to simplify VAT administration. In particular, it is about the possibility of quarterly instead of monthly reporting, the use of consolidated tax invoices, and pre-filling the tax part of the data.
So far, the Ministry of Finance has not detailed which types of activities can be transferred from the 2nd to the 3rd group and which services will be taxed at a rate of 10%.
The final rates for various types of activities, the mechanism for combining the new single tax with VAT, and the financial burden on entrepreneurs after the transition to the new rules have also not been determined.
«Currently, individual entrepreneurs of the 3rd group without VAT pay 5% of the single tax and 1% of the military levy. That is, the EP rate for some entrepreneurs may actually double. And after exceeding the threshold, full-fledged VAT administration will be added to this,» Vasylchenko noted.
She believes that reforming the simplified system is necessary to combat business fragmentation, bogus self-employment, and schemes using sole proprietors. At the same time, in her opinion, the new rules should not create an additional burden on small businesses that operate legally.
«An entrepreneur who independently provides services, has created a small studio, workshop, agency, or service business — this is not a tax scheme!» the deputy stated.
Vasylchenko also called on the Ministry of Finance to involve small business representatives in developing future changes.
At the moment, we are talking about the development of the draft law, not about the rules that have already been adopted. Before the document is submitted to the Verkhovna Rada, its parameters may change.
